What is the impact of the world’s largest food company? 🤔

This week’s read time: 6 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

THIS WEEK’S COMPANY

Nestlé

This week we dive deep into Nestlé’s environmental and social impact.

Nestlé is the world’s largest food and beverage company, with a presence in 188 countries and $103 billion in revenue (2023). Its diverse portfolio includes over 2,000 brands, including Nescafé, KitKat, Maggi, San Pellegrino, and others.

Some interesting facts:

• Nestlé was founded in 1867 by Henri Nestlé, a German-born pharmacist, who created a breakthrough infant food product to combat infant mortality.

• The company’s instant coffee, Nescafé, was included in the emergency rations of every US soldier in World War II. When the war came to an end in 1945, Nescafé was added to CARE packages for populations in need across Europe and Japan.

• Nestlé has faced several controversies over the years, most notably regarding its marketing practices for its infant products in developing countries, and for its water extraction practices, particularly in drought-prone areas.

COMPANY’S IMPACT

Nestlé’s overall impact score

Nestlé has a general impact score of -0.27 (on a scale from -5 to +5). Its impact is spread across 12 different UN Sustainable Development Goals (SDGs) and 12 different topics, split between positive and negative analyses.

The company provides approximately 127.6 billion servings of affordable nutrition with micronutrient fortification annually, making a significant contribution to the global food supply. In the past decade, it has offered products to 3 billion lower-income consumers globally, with many of its products being cheaper than their alternatives in numerous developing countries. However, products deemed unhealthy (with high salt, fat, and sugar content) generate 41% of the company's total revenue.

In the socio-economic sphere,

the company employs approximately 270,000 people and provides salaries above the industry average. Nestlé works directly with 165,000 direct suppliers and 695,000 individual farmers globally, whom it also supports through training and microloans. However, it has been unable to eliminate child and forced labor, with thousands of children working indirectly in its cocoa supply chain in Africa and South America. Additionally, the company is involved in human rights violations through its suppliers, affecting thousands of people. For example, some of its suppliers in Indonesia were linked to land grabbing and the prosecution of environmental and human rights defenders.

Environmentally,

Nestlé has a significant impact, with its annual GHG emissions exceeding 87.5 million metric tons of CO₂e (equivalent to the emissions of 22.5 coal-fired power plants in one year). The company also withdraws a considerable amount of water (95.6 million m³ in 2023), over 36% of which comes from high water-stressed areas. Nestlé’s raw materials include palm oil, cattle products, cocoa, soy, coffee, sugar, timber, and others, for the production of which millions of hectares of land were used, contributing to deforestation, water scarcity, soil degradation, and biodiversity loss. The company also generates over 1.5 million tons of waste annually.

_{*The impact score is current as of May 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology at the end of this email.}

SCORES BY SDG

Nestlé’s impact scores by SDG

Positively (and by weight), the company scores the highest in Zero Hunger SDG (3.70), followed by Good Health and Well-being (0.15), and Partnership for the Goals (3.02).

Negatively, the company scores the worst in Responsible Consumption and Production SDG (-2.76), followed by Climate Action (-3.81), and Decent Work and Economic Growth (-0.80).

*the analysis takes into account the weight of the SDGs

The company also influences two SDGs (3 and 8) both positively and negatively, which effectively balance each other out. For instance, Nestlé negatively impacts SDG 3 (Good Health and Well-being) as it generates a considerable portion of its sales from unhealthy products. However, it also positively contributes by providing products that serve as complete nutrition for infants (Nestlé has a 12.7% market share in the infant nutrition market).

PEER GROUP COMPARISON

Nestlé’s scores by ILG Theme and compared to its competitors

Starting this week, we will analyze the companies’ scores by ILG Theme. The Investment Leaders Group (ILG) is a global network of pension funds, insurers, and asset managers, with over $12 trillion under management.

They came up with a framework (facilitated by the Cambridge Institute for Sustainability Leadership) to analyze impact that uses the SDGs as a reference point but with 6 broader themes, 3 of them related to Social (Basic Needs, Decent Work, Well-being), and the 3 others to Environmental (Climate Stability, Healthy Ecosystems, Resource Security). Each analysis is linked to one particular ILG Theme.

Nestlé scores positively in the Basic Needs and Well-being themes, but negatively in the remaining themes. Compared to its competitors, Nestlé performs better in two of the six themes, when considering the peer group average.

CONCLUSION

Final words

So, Nestlé’s key social and environmental impact lies in …

its core business of providing affordable and nutritive products to billions of people in 188 countries through its +2,000 brands, the thousands of jobs it creates and the thousands of farmers it supports. Negatively, Nestlé has a huge environmental impact through its sourcing of raw materials, while it also consumes and extracts a significant amount of water from high-stress water areas. Additionally, it produces a lot of waste and emits a huge amount of GHG emissions, contributing to climate change. Nestlé has also been involved in child labor and human rights violations.

Its negative -0.27 score is a balance of all of these factors and topics.

If you want to delve deeper into Nestlé’s impact, you can explore it here.

Next week, we will analyze the impact of Shell, one of the largest oil and gas companies in the world. 🛢️

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METHODOLOGY & SCORES

Crafted from rigorous, fact-based data, our impact scores are powered by Impaakt, a pioneering Swiss-based financial data provider focused on tangible impact over mere intentions. Impaakt scores are powered by stakeholders, ensuring corporates, investors and consumers receive robust, impartial insights to make informed decisions on where to allocate their resources.

Key Features of Our Impact Analysis:

• Comprehensive Research: Our analyses span thousands of companies across various sectors, focusing on the tangible impacts of their business operations, products, processes, and innovations.

• Live, Dynamic Scores: Reflecting the latest in reports and research, our impact scores are continually updated, providing a current view of each company's footprint.

• Zero Tolerance for Greenwashing: By including stakeholders in assessing actions only once the impact occurs, we ensure our assessments reflect the voice of global society, free from greenwashing, and from empty promises and intentions.